Chalk Talk: Buying Wine Futures

Recently Sigel’s sent out their annual announcement of Bordeaux wine futures. This is the season for these to be offered so it’s a good time to have a discussion about them. First, wine futures, as they are called, are a contract under which you pay in full now for delivery of specified Bordeaux wines in 2013. The exact date depends on when the wines are released by the château and shipped. However, right now all the wines being offered are from the good, but not great, 2011 vintage. The reason why you might want to pay for wine two years in advance is to get a better price. However, there are some things to you need to know.

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First, and in recent years of most importance, is that the futures seller has your money. If they go bankrupt before you get the wine then those funds are likely to be lost or treated as an unsecured debt of the failed business. Most wine futures are offered by wine retailers and in the past few years both Majestic and Centennial have disappeared from the local wine scene. It has been a similar story nationally. So, choose a seller who will be around in two years.

Second, check where the wine is delivered. If you order from a local merchant, you will most likely pick up the wine at a local store. However, a New York merchant is likely quoting prices “FOB New York” which means that you have to pay the additional charge (around $5 per bottle) of shipping the wine to Dallas. If the wine arrives in the US during the summer, you may also have to pay for storage in New York until the weather is cool enough to ship.

Finally, the wines will be in the stores in two years time and you could always wait until then to buy while, hopefully in the meantime, earn some interest on your money. If you don’t expect the retail price of 2011 Bordeaux to increase at least 5% then that is probably the best way to buy the wine. In the past 30 years, futures buyers have profited by riding a trend of increasing Bordeaux prices due to escalating worldwide demand. In current economic conditions that trend may pause as it did in 2008-2009, so futures may not be such a sure-fire way to buy wine cheaply. Personally, I am sitting this one out as it seems to be the spectacular vintages that are the most profitable to buy as futures. However, I am considering buying pork belly futures. Seems to be a lot of demand there.